Stocks in the last weeks of August are likely to be affected by signals of lower interest rates and easing credit policies for the real estate and securities sectors.

Shares on both Viet Nam's stock markets surged last week which analysts said this could be for two reasons: first the VN-Index had several weeks in a downturn before rising, leaving the psychological milestone of 400 points, so a few "green" days were normal. Second, the rise could be in anticipation of a new monetary policy.

In a message broadcast after taking office, new State Bank Governor Nguyen Van Binh said that from late September onwards, lending rates for the manufacturing sector would be around 17-19 per cent per year.

Despite a sudden decline on Friday, the VN-Index on the HCM City bourse had a successful week's trading, finishing up 4.39 per cent over the previous week's close to hit 400.76 points. The market volume dropped slightly, however, to just over 26 million shares worth a total of VND450.8 billion (US$21.7 million).

Blue chips were the largest gainers with the VS-Large Cap, which tracks the money flow into large cap stocks, recording the highest gain of nearly 5 per cent while VS-Mid Cap rose 4.33 per cent, VS-Small Cap was up 2.29 per cent and VS-Micro Cap rose 1 per cent.

There were many signs economic prospects were brighter towards the end of the year, stock analysts with the financial website vietstock.vn said in its weekly report.

Inflation would likely peak in August and decrease gradually, Government bond tenders were successful, and the Governor's statement provided reassurance for the market, the website said.

"The decline on Friday was largely caused by investor fears of the growing eurozone debt crisis and deepening signs of a second US recession," they said.

Standard&Poor's has just lowered Viet Nam's long-term currency rating to BB- from BB and kept the nation's foreign currency sovereign credit rating at BB-on its assumption of the risk of Viet Nam's near-term economic and financial instability.

However, vietstock analysts believed the market should not be too concerned about S&P's move as the downgrade could be the result of changes in the methodology and assumption for rating sovereign debt.

"We need to read the S&P statement that the basic assumptions about the level of confidence (in underlying credit fundamentals) of Viet Nam were not changed. In addition, the evaluation of credit on foreign currency should be more noticeable."

The market this week will receive official August inflation data, and investors' eyes will focus on the central bank's solution package to cool down interest rates.

Gold will continue to attract investor attention after gold prices on the domestic market broke all records, climbing to over VND47 million ($2,279) a tael on Friday, along with a 6 per cent rise in global prices last week.

Independent analyst Nguyen Viet Hung said: "If the gold market continues to heat up this week, it will distract stock investors and some will likely shift to gold for speculation."

On the Ha Noi Stock Exchange, the HNX-Index also gained 2.3 per cent over the previous week to close on Friday at 67.53 points. The average volume of daily trades for the week rose 31 per cent, reaching 33 million shares, costing VND331 billion ($15.9 million).

Foreign investors were net buyers of VND1.4 billion ($67,300) worth of shares in HCM City last week and net sellers of VND238 million ($11,400) worth of shares in Ha Noi.

With a total net buy of VND23 billion ($1.1 million) in shares of software producer FPT Corp (FPT), foreigners reached the ceiling for foreign ownership in the corporation.